Reading: The Economic Cold

By David Gaffen

In today’s Wall Street Journal, David Wessel has an overview of the credit-market malaise, and some of the attendant problems within it. “The Fed’s weekly numbers show that bank lending is still increasing. But a lot of that is unwilling lending,” he writes. “Some banks are making loans under old promises to finance customers if they couldn’t access financial markets. Others are taking on to their books loans made through complicated off-balance-sheet entities, and now have to set aside capital as a result.”

In the New York Times, Jenny Anderson and Vikas Bajaj detail how bankers continued to sell mortgage-backed securities even as the trading departments started to insulate themselves from the risk. “Many of the home loans tied to these investments quickly defaulted, resulting in billions of dollars of losses for investors,” they write. “At the same time, many of the companies that sold these securities, concerned about a looming meltdown in the housing market, protected themselves from losses.”

Markets hate uncertainty, or so the phrase goes. Nonsense, writes Caroline Baum in Bloomberg. “During good times, central bankers don’t pepper their official statements and speeches with references to uncertainty, which makes me think uncertainty is a euphemism for ‘things are worse than we imagined.’ It’s an excuse, in other words: a way to paper over a bad forecast,” she writes.

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